‘Scary’ mortgage rates, sticker shock forcing buyers to forfeit contracts, broker says

September 28, 2022

Montana Mortgages

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As the 30-year fixed mortgage rate doubles from a year ago and the housing market faces ‘less affordability’, a real estate broker warns that potential buyers are more likely to forgo deals in course without consequence.

“These are some pretty scary numbers. You never would have expected this before because you usually wouldn’t have the option of going back on a contract,” said Pamela Liebman, president and chief executive of the Corcoran Group, at “Mornings with Maria” on Wednesday. “No one would give you a mortgage contingency when the market was on fire and just going up, up, up.”

“But now that sellers are a little more desperate to make these deals, they’re offering these contractual contingencies,” the brokerage continued.

As mortgage rates continue to hit multi-year highs every week and market demand begins to cool, a Redfin report found that Sun Belt states had the highest contract cancellation rates . According to Liebman, many homebuyers walk away after feeling the shock of the mortgage sticker.

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Corcoran Group President and CEO Pamela Liebman said “scary” mortgage rates had created “less affordability” in the housing market during “Mornings with Maria” on Wednesday, September 28, 2022. (AP Newsroom)

Mortgage rates have risen more than one percentage point over the past six weeks. At the end of the week of September 23, the 30-year fixed rate was 6.52%, which is the highest since mid-2008.

“You may have applied for a mortgage two weeks ago, and now the cost is much higher, and that just makes it unaffordable and people will leave,” Liebman explained.

Onerous mortgages and house prices have taken “a lot of people” out of the home buying market, the broker said.

“I also think a lot of fun places to buy, whether it’s Vegas or Orlando or Montana, some of them aren’t as fun anymore because it’s gotten a lot more expensive,” Liebman said. “And disposable income isn’t what it used to be because of inflation everywhere.”

Now that home sellers have more listings to compete with, the real estate expert noted, people will try to get buyers’ attention and offers by lowering the asking price.

“It’s a nationwide market that has really seen such incredible price increases during the pandemic, that it’s a double whammy of expensive prices and expensive mortgages,” Liebman said. “So something must give.”

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Although Liebman said she doesn’t believe the United States is in a real estate recession, she advised those active in the market to “expect surprises.”

“We want more people to be able to buy new homes, and now we have a whole new generation preparing to enter the market. So I think housing will be fine, and as President Powell said, can -be a bit more balanced,” said the CEO of the Corcoran Group. “You really need to talk to someone who can advise you financially if a rate hike is going to crush you financially.”

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Elizabeth Pritchett of FOX Business contributed to this report.